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11 June 2024Standard essential patentsLiz Hockley

Germany green-lights automakers’ SEP cartel

Federal Cartel Office says alliance of BMW, Mercedes-Benz, VW and ThyssenKrupp can go ahead | To avoid sanctions, the car makers must focus negotiations on SEPs that can  be applied in other industriesnot just automotive.

In a “groundbreaking” move, Germany’s national competition authority has approved the formation of an alliance of three car manufacturers and an industrial conglomerate to negotiate jointly for standard-essential patent (SEP) licences covering wireless technology.

The Federal Cartel Office said yesterday, June 10, that it would permit the launch of the Automotive Licensing Negotiation Group (ALNG)—a cooperation planned by BMW, Mercedes-Benz, VW and ThyssenKrupp—under certain conditions.

President Andreas Mundt noted that the use of 4G and 5G in cars required “thousands of patents to be licensed”, and that licensors could bundle the patents required for implementing standards into a package to be offered for a fair rate.

“Our examination focuses for the first time on a cooperation on the licensees’ side, which is why we are breaking new ground in the area of competition law, a development which is significant far beyond Germany,” Mundt said.

However, the Federal Cartel Office said that the activities of the ALNG must be limited to standards that were not specific to the automotive sector, and that participation in negotiations must be voluntary.

Furthermore, the ALNG should be open to suppliers from the automotive industry and the exchange of information must be limited “to the absolute minimum necessary”.

Negotiation power balance

In its statement, the office acknowledged that there were different views on establishing licensing negotiation groups, which was a “new development”.

ALNG members claimed that the cooperation could reduce the number of required negotiation meetings and thus reduce transaction costs, while licensors raised concerns that such collectives could shift the negotiation power balance at their expense.

The office said that in its examination of the ALNG and its potential effect on competition, it had focused on the licensing markets affected as well as the various automotive markets.

Regarding the SEP licensing market for general mobile communications technologies, the combined share of the parties involved and possible future ALNG members from the automotive industry was below a 15% threshold, the office concluded.

“As the licences are required for many devices (for example smartphones), the demand side includes a very significant number of companies and extends far beyond the automotive industry,” it said.

News of the proposal for the licensing collaboration was first reported by MLex Market Insight in January.

In 2021, VW Group and BMW were fined €875 million ($940m) by the European Commission for colluding to restrict competition in diesel emissions cleaning.

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